CLEVELAND, OHIO...Sustained and above average earnings growth will be Eaton Corporation's dominant theme for the rest of this decade, and the company has selected two of its senior executives to take over leadership of the company in September, William E. Butler, Chairman and Chief Executive Officer, told shareholders gathered for the company's annual meeting, held here today.
The company's Board of Directors also announced a 33 percent increase in the quarterly dividend, raising it from 30 cents to 40 cents. This is the second increase in less than two years.
Butler used the occasion to announce the election by the Board of Directors of Stephen R. Hardis to the position of Chief Executive Officer, and Alexander M. Cutler to President and Chief Operating Officer, effective September 1, 1995. Hardis will also assume the board chairmanship when Butler retires at the end of the year. Cutler succeeds John S. Rodewig, President and Chief Operating Officer-Vehicle Components, who earlier announced that he would retire at the end of the year.
Butler said the company will continue to focus on three areas to drive growth: new product development, acquisitions and global opportunities. "The company has made excellent progress in these areas," he said. "Our sales increased 39 percent last year, to $6.1 billion, and net income nearly doubled, to $333 million." He also reminded his audience that Eaton reported last week that sales, earnings and earnings per share for the first quarter of 1995 set new records for the fifth quarter in a row.
"Superior returns, a solid balance sheet and strong cash generation give the company the foundation to support sustainable earnings growth," he said. "With the acquisition of the Westinghouse Distribution and Control Business Unit last year, Eaton is now in a position in which every major business line is a leader in the markets it serves."
Regarding Eaton's market performance, Butler said that while cyclical trends are receiving close scrutiny, a seldom-recognized secular growth is occurring in virtually all of Eaton's markets and it is contributing to the company's confidence as it pursues the goal of aggressive earnings growth.
Butler said the business restructurings that took place in the 1980s were having a clear benefit, for Eaton as well as other U. S. manufacturers, saying that the company's manufacturing base is again world competitive. He also cited the strength of exports and the capital spending boom in the U.S. as examples of that competitiveness. He pointed out that the company will invest nearly $600 million, or about 10 per cent of 1994 sales, on capital investments and research and development this year.
In noting that the board of directors had agreed to raise the quarterly dividend by 33 percent, to 40 cents a share from 30 cents earlier in the day after reviewing the company's financial strength, Butler said the primary goal for shareholder reward was to increase appreciation of Eaton shares. He pointed out that the total return on shareholder investment over the past five years has been greater than 15 percent annually.
In spite of that level of return, and the fact that the company's performance was in the top quartile of the Standard & Poors 400, Butler said the company's share price discount to the S&P 400 average is below many companies whose performance and prospects are less bright than Eaton's. "We will continue to talk about the Eaton growth story because I truly believe we have become a very different company and a much better company," he said.
"At the end of the day, however, we are forced to acknowledge that long-held perceptions change slowly. On the other hand, our long-term shareholders can take comfort in the following truth-greater rewards come to those who recognize positive change before it becomes historical fact," Butler said.
In closing his remarks, Butler said, "Finally, I would like to pay tribute to all the Eaton men and women who have worked so hard and given so freely of themselves to make Eaton the outstanding company it has become. We have had good management, yes, but we must remember that it is our employees on the front lines who really get the job done."
In other business at the meeting, Eaton shareholders elected Ohio-based businessman Ernie Green to the board of directors. Green, who is president and chief executive officer of EGI, Inc., succeeds Hooper G. Pattillo, a director since 1979, who retired following the meeting. Shareholders also approved an employee stock option plan and approved an incentive compensation deferral plan.
Eaton Corporation is a global manufacturer of highly engineered products which serve vehicle, industrial, construction, commercial, aerospace and marine markets. Principal products include truck transmissions and axles, engine components, hydraulic products, electrical power distribution and control equipment, ion implanters and a wide variety of controls. Headquartered at Eaton Center in Cleveland, the company has 51,000 employees and 150 manufacturing sites in 18 countries around the world. Sales for 1994 were $6.1 billion.